John Redwood criticises the Government’s approach to saving

By | Published: February 27, 2009

Speaking during the debate on the Saving Gateway Accounts Bill in the House of Commons earlier this week, John Redwood strongly criticised the Government’s record on savings. In his speech, he questioned whether new measures to promote saving would have any effect, given that interest rates for savers are so low. He also highlighted the ridiculousness of the situation whereby the Government is borrowing money in order to fund measures that are supposed to encouraging people to save.

The full text of John’s speech, taken from Hansard, now follows:

Mr. John Redwood (Wokingham) (Con): The Bill is a mouse of a measure to handle an elephant of a problem. The Liberal Democrats say that this is the Oscars ceremony, but can anyone believe that the Bill deserves an Oscar when it is well below the standard of an amateur production, albeit by a group of professionals who should know better? Indeed, Ministers’ audacity in not realising how feeble the Bill is in relation to the savings problem that they confront takes one’s breath away.

We meet against the background of a huge economic crisis, in which savers are being wiped out daily. If they have risky assets, they are falling in value catastrophically. If their money is on deposit in the banks, the interest rate is now tiny. In the stages of the Bill in which I participated, one of my biggest disappointments was the unwillingness or inability of the Economic Secretary and the Government to tell us anything about how the money would be invested and what sort of return it might earn, yet they have had a decade to prepare the measure. They tell us that they have consulted the savings industry, which will help effect the Bill, but there the Economic Secretary sits, thinking of something else, because he knows that he will get his Bill and he has not a clue about what sort of offer or deal will be available when it is enacted and translated into action on the ground.

It is a disgrace that so many people in this country are so poor that they have no savings. It is a disgrace that a savings culture for such people has not been more actively promoted to give them a buffer and more options and choices in life. It is a common aim of all the parties represented in the House to do something about it. However, do the Government genuinely believe that such a measure will work if interest rates for savers are 0.5 per cent or 1 per cent.? Do they believe that it will work if all they do is borrow more and more, thus conveying the message that the way to get ahead and have a decent job is to borrow and borrow, not save and be prudent?

The Government are by far the most imprudent with which the country has ever been cursed. They add trillions to the public debt— [Interruption.] They think that that is funny, but they have the audacity to say to the very poor that they must never borrow, but save, and that the Government will give them a tiny increment from the money that they will borrow on behalf of us all. They cannot even tell the prospective savers what sort of an interest rate they might get on their money.25 Feb 2009 : Column 327
It is typical of a Government who have lost the plot, who are wrecking the economy and driving us deeper and deeper into gross national debt that they introduce a pathetic, limp, delayed and inadequate Bill and feel proud of themselves.

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If you sincerely want the really poor to save, then even more important than reinstating interest rates to normal levels (3%? 4%?) is to scrap asset-based means testing.

If somebody has £5,000 tucked away for a rainy day, whether they get £10 interest or £250 is neither here nor there – what is cruel is to reduce the benefits they would get so savagely that they are forced to live on their savings for a few weeks until they are all gone – only then can they get full benefits.

In today’s low-interest environment, calling for tax cuts on interest is completely missing the point. And before we cut taxes on savings income, how about cutting taxes on employment to enable people to make the money in the first place to be able to save some?

About John Redwood

John Redwood won a free place at Kent College, Canterbury, He graduated from Magdalen College Oxford, has a DPhil and is a fellow of All Souls College. A businessman by background, he has been a director of NM Rothschild merchant bank and chairman of a quoted industrial PLC.